By Rick Smith

With all of the access to easy credit over the last decade, many consumers find themselves in a world of debt.…  Coupled with the worsening economic conditions, this has turned into a serious situation for many families. The stress of excessive debt can cause a multitude of problems for a family that can lead to arguments, divorce and serious health problems. Even though the situation may look bleak there are a few tips you can use to help you climb out of debt.

An important thing to realize is that reducing your debt will take some time and some sacrifice, but if you are dedicated to the process, you can eliminate your debt over time. The key to an effective debt reduction program starts with controlling your current spending and taking the extra money you save from this and applying it to your debt.

The first thing you need to do is make a list of all of your current debt. This can be a difficult process for many people but it’s essential that you do this so you have a clear picture of your overall debt and can track you progress as you pay off this debt. This list should include the total amount still due, the monthly payment for each debt and the interest rate. Once you have this list, order your bills from least amount owed to largest balance.

Now that you have a clear picture of your debt obligations, you’ll need to try and reduce your current spending so you can free up some cash to help accelerate the process of paying off your creditors. A good place to start is any monthly expense you have that is not absolutely essential. Even though you may have established certain habits that you think need to be a part of your life, you should rethink every one of these expenses and either eliminate them or severely reduce their cost.

Some great places to start are your current cell phone bill. Can you reduce the minutes you are paying for each month, and can you use your cell phone as your only phone and eliminate a home phone bill? Can you lower your cable bill by turning off some of the premium channels that you hardly ever have time to watch? Meals are also a great place to lower your monthly expenses. Try bringing a lunch to work instead of eating out. Even if you do this a few times a week it could add up to hundreds of dollars a month. Skip the morning coffee and brew some at home for the trip into work. These $3 lattes can add up to big bucks every month. Look into carpools or even mass transit if you live in a large enough city. Driving to work and back is expensive and this daily expense really adds up. There are hundreds of ways you can lower your monthly expenses when you stop to think about it and every dollar you save can be applied to your debt immediately.

Another good idea is to call any credit card companies that you owe money, and try to negotiate a lower rate. This sounds too easy, but many of them will lower your rate if you simply ask them. As long as you are current on your payments, they want to keep you as a customer and many of the people answering the phones have the authority to drop your rate on the spot. If they won’t, ask then about any special programs they are offering on new cards and consider switching your balance to one of them if they have a dramatically lower rate.

Once you have extra cash each month from your cost-cutting activities, you can use this to help pay down your debt. The best way to do this is to make all of your monthly minimum payments, and any funds you have left over you should add to the payment for your lowest balance loan. It may seem like a better idea to send this money to your debt with the highest interest rate, but there is a psychological advantage to being able to pay off a loan early and attacking your lowest balance will allow you to enjoy this feeling quickly. This can be a huge incentive to continue on with your plan and give you the added willpower to continue. Once you have paid off your first debt, take the money that you would have sent this debt as a monthly minimum and send it to the next largest debt along with its monthly minimum. This will help you pay this loan off quicker and move on to the next one. The more you pay off, the more money you have for the ones that remain and the faster you can pay them off as well. There is a bit of a financial snowball effect that develops over time that can help you reach your goals.

Eliminating your debt is a smart idea in this fickle economy, but can be a difficult process that takes a lot of work. It will improve your quality of life and allow you to make future purchases without the guilt of carrying your old debt. The key is sticking to your plan and avoiding any new debt that can cause you a financial setback. Over time you will enjoy the financial freedom that being debt-free can bring you.

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